- In-house salaries may appear to be the most cost-effective option on paper, but this monthly ‘controlled cost’ isn’t directly comparable with the invoice from a managed IT services provider. The two aren’t measuring the same thing or accounting for the same total value.
- Make sure you know what your money is paying for with each method.
- Consider your needs and risk tolerance as well as your budget before you come to a decision.
When weighing up whether to hire in-house for IT or outsource it, there are more considerations than you might expect.
And for high-potential, fast-growth businesses it’s vital that you make the right decision. In my experience, IT resources and expertise are often stretched thin, leaving teams firefighting rather than focusing on strategic projects that help the wider company succeed.
Staff salaries may appear to be the most cost-effective option on paper, but this monthly ‘controlled cost’ isn’t directly comparable with the invoice from a managed IT services provider. The two aren’t measuring the same thing or accounting for the same total value.
To help you make the right choice for your business, and future-proof that decision, here’s what you get from outsourcing IT versus in-house, together with a checklist of questions you should answer before choosing which direction to take.
Make sure you consider all the costs associated with in-house IT
There’s a lot more to consider here than salary, which alone can be a sizeable financial commitment.
Looking at job ads for mid-level IT professionals, the average annual salary is around £35,000-£45,000. But you must also consider the additional costs you will be responsible for every month and during their tenure.
Employee benefits, hiring and training
Beyond salary, there are wider costs associated with an employee: National Insurance, pension contributions, holiday pay, sick cover, maternity or paternity leave, plus additional benefits like private healthcare, team-building social events, subsidised memberships and income protection.
The hiring process, every time you need to scale or if staff members leave, can be a costly and time-intensive process, too.
It’s a competitive labour market for IT professionals and specialist skills are in demand, particularly for cyber security, data governance and AI tooling. So, be prepared for delays finding talent to fill vacancies, to compete for the best talent and enhance your offer, to pay specialist recruitment companies, and for talent to be headhunted for new roles at any time.
Onboarding and training need to be factored in as well. You, the employer, are responsible for ongoing training to ensure your IT function is up to date with the latest technologies, evolving threats and compliance requirements.
Investment in your IT estate
The capital side of owning and growing your IT estate in-house is significant. You’ll typically need to buy your own servers, hardware, networking equipment and software licences up front.
The responsibility for refreshing your equipment as technology advances sits with you – leaving this too long or under-investing can hinder the wider business and expose it to risk. Slow and unreliable tech can also frustrate and demotivate your workforce.
Downtime, security and compliance
Finally, there are more nuanced costs and risks to consider, like systems downtime, security and compliance. The cost and business exposure when something goes wrong can be difficult to predict.
A small IT team is unlikely to be available around the clock, seven days a week. Any delays can impact the wider business through lost productivity, missed revenue and reputational damage.
Beyond resolving day-to-day technical issues, you’ll need to consider how they will manage cyber security, data protection and regulatory requirements as you grow. These need the right expertise, focus and tooling.
Know everything a managed IT model buys you
There’s a reason why outsourcing your IT may seem more expensive than hiring in-house – because you get a lot more.
Your monthly quoted invoice will likely bundle your tooling, monitoring, security and out-of-hours assistance, avoiding upfront capital expenditures and unpredictable add-on costs.
Your business will have access to many different specialists within each area of modern computing, which helps overcome the challenge of finding someone who can do it all (and well).
Economies of scale mean the costs of the latest technologies and best specialists are spread across your MSP’s clients, providing you with more affordable access than if you were to procure them on your own.
For some businesses, outsourcing may be beneficial if their IT people spend all or most of their time dealing with day-to-day issues instead of working on strategic projects that will move the business forward. A co-managed model can work well here, where internally you keep ownership of what your IT people do best and their institutional knowledge, with access to specialist skills, strategy advice and 24/7 support.
Finally, scalability can be invaluable for a fast-growth small business (whether that’s up or down) during periods of acceleration or stability. It’s common for SMEs to either have more IT than they need or too little when they really need it.
The important questions to ask yourself
Every business will have its own unique set of needs, risk tolerance and budget.
For a growing number of SMEs, managed or co-managed IT support is helping them achieve their full potential and control costs.
If you’re considering your best option, here are some questions to ask yourself:
- Can you cover the full demands of IT – networking, cloud, cyber security, support, back-up, compliance and strategy – with the person or team you have in place?
- Do you have genuine cover for incidents outside of standard working hours, and for staff holidays and sick leave?
- Have you calculated the full cost of an in-house hire, rather than just the salary?
- Could your business absorb the cost of a serious outage or breach if it happened unexpectedly today?
- Are you confident you’re meeting your sector’s data protection and compliance obligations?
- Is your business prioritising strategic IT projects that move the company forward?
- Do you have the cash available for hardware refreshes every three to five years?
- Are you able to scale your IT quickly and significantly to achieve your growth plans?
If you answered “no” often, that’s a strong signal outsourcing may help you. But whatever you decide, base it on total cost of ownership and acceptable risk, rather than comparing a monthly salary with an MSP invoice.
Tom Shefford is head of IT at Opus Technology.
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